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3-year budgets proposed

06 June 2011

The Treasury and Resources Minister is asking the States to extend the States budgeting period from 1 to 3 years. This would fit with the existing political cycle, which sees each Council of Ministers elected for a 3-year term.

Senator Philip Ozouf said “We have been discussing longer term financial planning for some years. Moving to a medium term financial planning framework will help to encourage more efficient budget management and will also enable departments to plan their Comprehensive Spending Review savings, and any associated restructuring, over a period of years.

“I am proposing that the current annual business plan and budget are replaced with one Medium Term Financial Plan debate, to determine the tax and spending envelope for a period of 3 years. Then the traditional, annual budget will propose tax, funding and variations to expenditure within overall limits.

"As there will always be political priorities that arise within the 3-year time frame, the law makes provision for an annual allocation of money for new political priorities.

“This change will provide greater control of States spending and certainty for departments over a period of time, while also retaining enough flexibility to manage emerging pressures and changes in priorities within overall spending limits. Departments will be given greater control over their budgets within the 3 years.

“I hope we can make these changes in time for 2012, so the new Council of Ministers, elected in November 2011, will propose the first Medium Term Financial Plan.”

The key proposed changes will deliver:

  • effective medium term financial planning
  • states spending limits set for the length of a Council of Ministers’ term of office
  • minimum department spending limits set for the same time period
  • central allocations created for growth and contingency spend to allow for future change
  • more efficient States decision making

These changes would address some key concerns raised by the Public Accounts Committee, the Comptroller and Auditor General, Scrutiny panels and the public over financial planning and management.

The current annual process focuses decision making on the short term and makes no provision for unforeseen expenditure, which has led to urgent calls for additional funding and the perception that the States is overspending.

The Treasury Minister believes the proposed Medium Term Financial Plan will:

  • encourage longer term planning horizons
  • provide greater flexibility for departments to plan ahead
  • deliver improved value for money within an overall States spending limit

Allocations for growth funding will allow the States to be responsive to changing needs without exceeding the agreed limits, and contingency funding will provide confidence that unforeseen events can be dealt with without additional unplanned calls on the public purse.

In addition, the amendment extends the remit of the Comptroller and Auditor General as agreed by the States in 2009.

The proposed amendment has been widely consulted on and the views of those who have contributed have been responded to and addressed.

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